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Weekly Market Report
DIAMOND MARKET OVERVIEW
Polished traders in Antwerp reported steady sales with no significant movement in prices. However, some said cautious sentiment in the retail markets and tight liquidity in rough, was affecting the general mood. “People are reluctant to hold stock and credit is tight,” said a manufacturer. The main PolishedPrices index ended the week on a stronger note, opening at 156.15 points on Friday, from Monday’s opening at 150.57.
Traders have signalled a softening in rough prices. According to some traders in the secondary market, lower quality goods of $100 million and below have taken a knock. Others said BHP Billiton’ spot tender was more or less flat from the previous month. The main focus is on next week’s DTC sight in London. Sightholders are waiting to see whether any possible changes in box assortments will translate in to changes in prices.
CORPORATE AND EVENTS
Goldman Sachs downgraded Gem Diamonds to 'neutral', but said that global luxury spending remains robust, Proactive Investor reported. Goldman Sachs slashed its recommendation on Gem Diamonds to ‘neutral’ from ‘buy’, but left its bullish stance on the sector unchanged, the report published on
said. The investment bank said the FTSE 250 diamond group was downgraded on valuation grounds after seeing its shares rise by around 40 percent this year. Since Gem Diamonds was added to Goldman’s Buy list in December last year, its shares have surged 49.1 percent compared with the 5.7 percent gain in the FTSE World Europe index, said the report. Over the last 12 months the shares are up 0.7 percent, versus the benchmark down 15.3 percent, it said. “Following this year’s strong performance, we see better upside potential on offer elsewhere in our coverage universe,” said Goldman analyst Eugene King. Despite the downgrade, the analyst reaffirmed his bullish 345 pence target price for Gem and made no material changes to the forecasts. King said global luxury spending remains robust, adding that the diamond market fundamentals will support a “prolonged period of tightness”. According to King, Gem is well positioned to take advantage of the strong demand in market given its growth plan for the flagship Letseng diamond mine in Lesotho, which King expects to achieve a production compound annual growth rate (CAGR) of 12.5 percent in 2013-2017, the report said.
Botswana will gain more than $5bn of diamond trading business by the end of next year when De Beers completes the transfer of its Diamond Trading Company (DTC) to Gaborone, a move that has already delivered benefits,
reported. Two Indian banks involved in financing the diamond business have been granted licences to set up offices in Botswana and two of De Beers’ customers, or sightholders as they are known, have set up small jewellery manufacturing businesses in the country, Varda Shine, CEO of DTC, said yesterday. De Beers sells about $6,5bn worth of rough diamonds a year and about $5bn of that is generated in the DTC office in London, said the
report. That business is being moved to Gaborone after a deal between the Botswana government and De Beers was unveiled in September, the report said. Up to 15 big banks are involved in financing the diamond business. "Two already have licences. I believe that once things are settled other banks will follow," Ms Shine said. Including the diamonds sold for beneficiation in Botswana, worth about $500m, Botswana will become the world’s leading rough diamond sales hub, selling not only diamonds mined in Botswana but those from De Beers mines in Canada, said the report. De Beers sells about $600m and $300m in SA and Namibia respectively each year. The balance will be sold in Gaborone, the
Fusion Tenders, in cooperation with I. Hennig & Co, announced an agreement with Storm Mountain Diamonds (SMD) to market the run-of-mine diamond production of the KAO mine. The KAO diamond mine in Lesotho is the fourth largest individual kimberlite pipe in South Africa and Lesotho (and the only one mining at or near surface). Operated by Storm Mountain Diamonds, the Kao mine is expected to produce in excess of 200,000 carats per year, making it the largest producer of diamonds in Lesotho, the joint statement said. The KAO rough diamond production will be offered by tender in Antwerp via Fusion Alternatives, with the first tender taking place from 7th to 10th May 2012. Initial expectations are that approximately 15,000+ carats will be offered at the first tender, it said. The KAO production will be conducted by sealed tender in the Antwerp offices of I. Hennig & Co. Antwerp.
HRD Antwerp said yesterday that following an investigation at its diamond laboratory, it has handed the case to the judicial authorities for a further examination on possible legal infringements. “We have been able to localize the causes and sources of the grading improprieties and have found that it solely involves only a few individuals and companies,” HRD Antwerp’s General Manager Georges Brys said in a statement. “The HRD Antwerp board unanimously felt that all the findings of the internal investigations should be passed on to the appropriate authorities. All staff members have received unequivocal instructions to fully cooperate,” he said. The statement said three diamond firms had been asked to clear their account at HRD Antwerp, said the statement, but declined to give the name of the firms. The move comes after the Antwerp World Diamond Centre (AWDC) and HRD Antwerp appointed an ad-hoc Committee of industry leaders and academics to guide the internal review and a specialized firm was called in to perform an independent forensic audit in the HRD Antwerp diamond lab.
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